An "important provision" is that taxpayers who rescued the banks in 2008 get their money back, Mr Osborne said in an interview with BBC Radio 4 yesterday.

"Absolutely at the heart of this is my determination that we have a banking system that works for the British economy rather than an economy that supports the banking system, which is what we inherited," he said.

The comments come as doubts linger about the British government's appetite for RBS to continue to own Ulster Bank.

Last week's announcement that Stephen Hester will leave RBS stoked fears in Dublin and Belfast about a possible sale of Ulster Bank.

Reports from sources close to the UK government said RBS may now look to get rid of the bank's non-performing businesses and highlighted the potential improvements to the RBS balance sheet following a disposal of Ulster Bank.

The sale of Ulster Bank at a knockdown price would be an enormous blow to Irish business which is already highly dependent on state-owned institutions.

Any further reduction in the number of lenders would almost certainly drive up the cost of borrowing and push down lending.

Mr Hester told this newspaper in an interview this month that RBS had looked at getting rid of Ulster Bank but had taken a decision to keep the Irish bank, which operates on both sides of the Border.